Local retail stores
pulling in customers

Small store success strategies is the topic of the second workshop Bruce Schwartau, regional University of Minnesota Extension educator in community economics, will present when he returns to Spring Valley on Wednesday, Oct. 17.

The session will start at 8 a.m. in the Spring Valley Community Center and will last from one to a maximum of two hours. The workshop will help independent retailers coexist with the big box stores that are so prevalent today.

It is designed for local retailers and the public is invited to attend at no charge. Schwartau will hand out findings from his retail trade analysis, including information that describes characteristics of the population in the local retail trade area.

He also noted that non-store retailers in the area should attend as they may become the future entrepreneurs in a locale and could be where to look if a community is seeking people to take over existing businesses when owners retire.

The program is sponsored by the Spring Valley Economic Development Authority. Economic development director Brian Hoff will host the workshop.

Spring Valley's retail businesses are doing a good job pulling shoppers into the community, according to Bruce Schwartau, University of Minnesota Extension Service educator in community economics.

Schwartau led a meeting attended by a handful of local business people Wednesday at the Spring Valley Community Center to present the findings from his retail trade analysis. The analysis was commissioned by the Spring Valley Economic Development Authority.

The analysis gave an historical overview of the area's retail trade sector and provided a basis for comparison with other areas. The information will also prove useful for identifying opportunities in the retail sector when Schwartau leads the second meeting in Spring Valley on Wednesday, Oct. 17. Schwartau used data from the Minnesota Department of Revenue, the U.S. Census and the Bureau of Economic Analysis for his report.

One of the key findings is that Spring Valley's "pull factor" is 0.93. The pull factor measures the size of a city's trade area using a formula that divides the city's sales per capita by the state's sales per capita.

The 0.93 pull factor compares to the 0.81 in Minnesota Development Region 10, which includes the southeastern corner of Minnesota. For comparison, Rochester has a pull factor of 1.52 while Austin has a pull factor of 0.47.

Although a pull factor of 1.00 means that sales volume equals the state average, most rural areas, except those in northern tourist areas such as Alexandria, which has the highest pull factor in the state at 1.92, have marks well below 1.00. Schwartau considers anything above 0.9 as 1.0 since the state has some lost sales as a whole.

"I have a lot of communities that would love to have 0.93 in pull factor," Schwartau told the business people assembled for the evening meeting.

Many of the local business people were impressed that the pull factor didn't include automotive or implement sales, considered by many to be the strongest retail sector in Spring Valley. Vehicles have a special vehicle tax rather than a general sales tax and implements are exempt from sales tax, thus neither are included in the analysis, which only looked at sales tax revenue. The pull factor also didn't include non-taxable items such as gasoline, food sold in grocery stores or many services.

His data showed that the 50 retail establishments in the city limits that collect sales tax had taxable retail sales of $11.9 million in 2005, the most recent year in which data is available.

In further analysis of this data, Schwartau found that when taking into account that the county income factor is 77 percent of the state average, expected taxable sales for Spring Valley would be $9.9 million, which means the city is taking in a surplus of $2 million more than expected. This "expected sales" figure is the amount of money city residents could spend on retail goods. If expected sales are less than actual sales, a community is considered to have "leakage" rather than a surplus.

Most of the comparisons of the various sectors were done on a county basis because the state doesn't provide breakdowns in sectors that don't include at least four businesses so people can't pinpoint sales figures for any one business to protect the privacy of single businesses.

Fillmore County has had a pull factor of less than 0.50 since 1990 and is below 0.40 in 2005, the last year figures are available. There were no historical statistics for Spring Valley available to Schwartau.

The county pull factor is slightly better than neighboring Houston County on the east and just slightly below neighboring Mower County on the west. The highest pull factors are in the merchandise categories of building materials and food items not consumed in a restaurant. The lowest categories are general merchandise and apparel.

Unlike Spring Valley, the county as a whole has retail leakage with significantly fewer actual sales recorded when compared to expected sales. The only two categories that show actual sales above expected sales are gasoline stations, which includes convenience and other items sold besides gasoline, along with vehicles and parts, which only includes vehicles such as ATVs that have sales tax rather than a vehicle tax.

The county has a median household income of $36,651, which is the lowest of the six counties in the extreme southeastern corner of the state. The Spring Valley trade area, which also includes the zip codes surrounding Spring Valley for a total population of 12,529, has a median household income of $47,933.

In terms of age, the county diverges the greatest from the state average in residents above 65, where the percentage is 19.3 percent compared to the state's 12.1 percent. The under 18 age category mirrors the state number, meaning the percentage of people in what is considered the adult working category is lower than the state as a whole. It is particularly evident in the 18 to 34 age category, which make up only 17.2 percent of county residents compared to a state level of 23.2 percent.

Schwartau also presented a chart of retail goods and services that showed Spring Valley's potential spending index as well as the estimated total dollars spent by residents living in the area without regard to whether the purchases were local. He will go into these in more detail at the next meeting.

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